Pent-Up Demand = Entrepreneurial Opportunity in the Service Sector

Apr 14, 2020

The COVID-19 storm clouds are beginning to dissipate in the Emerald City. Seattle was the first major metropolitan area in the United States to have its small businesses impacted by the coronavirus.  Governor Inslee, one month ago on March 15, announced the temporary shutdown of all restaurants, bars, and entertainment & recreation facilities ( other than for take-out. These business closures have resulted in extreme hardship for entrepreneurs, their employees, and the community in general.

The closures have also created a unique entrepreneurial opportunity for business owners and entrepreneurs. The opportunity is in the form of the pent-up demand for services that are anticipated to result when our community is given the “green light” to return to our normal routines and activities. This demand is anticipated to be robust locally because Seattle is blessed to have numerous strong local employers (Microsoft, Google, Amazon, Smartsheet, Costco, etc.) who were not forced to layoff employees due to continued strong demand for their products & services and/or the ability of their workforce to transition to home based virtual employment. These employees are eager to purchase products and services from our small business community.

No business sector is likely to rebound quicker than the service sector, as the infrastructure necessary to engage with customers is already in place or can be built with the addition of employees relatively rapidly.

The following are a few business models that are anticipated to have strong demand for their services for the remainder of 2020 and into the future, if the business model is run effectively.

Personal Care – Appointment books are going to fill up quickly at hair salons, barbers, nail studios, and other cosmetology providers when people have the ability to visit the locations.  It is anticipated that the backlog will take many months to satisfy.  Some businesses, unfortunately, will not reopen. Those spaces will provide opportunities for new entrepreneurship.  Customers without providers will find new providers.  Employees without places to return will have the opportunity to go into business for themselves or align with operating businesses.

Fitness – The lead business broker in IBA’s fitness industry transaction division, Vishal Punj, introduced me to a new term, the COVID 19.  This does not refer to the coronavirus, but the extra pounds added while cocooning, eating, and binge watching Netflix.  It is anticipated that our active community that loves to be social and outdoors will want to return to their prior level of fitness and physical appearance in a timely manner with summer on the horizon. This collective motivation by the population will provide strong customer demand for personal trainers, cross-fit, cycle studios, gyms, and dieticians in the second half of 2020.

Janitorial – Many houses, condominiums, and apartments are going to be ready for a professional cleaning after the self-quarantine period is over.  This market demand will have maid services and carpet cleaning companies filling up their schedules and adding new customers for many months into the horizon.

Daycare, Preschools, & Camps – Several months of reduced social engagement has been difficult for the children in our community.  Children are eager to play, learn, and socialize.  The summer of 2020 should see strong enrollments in daycares, preschools, and summer camp opportunities.  The demand for these services should be enhanced by parents needing to work longer hours to make up for lost time & productivity and the fact that travel will likely be regionalized this year.  It is not projected that many people will be going on cruises, visiting Disneyland, or going to Europe in the summer of 2020.

Experiences – Reduced social engagement has also been difficult for adults. It is anticipated that demand for education (both academic & personal development) and experiential opportunities (Cooking classes, artistic education, and outdoor activities from sailing to rock climbing) will be strong until the rain returns to the region in November.

Entrepreneurship is blessed to have a short memory like professional sports. The reality is no one is thinking about last year’s Seahawk’s season when we lost three of our top running backs to injury and had to recruit Marshawn Lynch to carry the ball in the playoffs.  The 12’s are focused on next year and whether a return to the Superbowl is possible. The same is true in business.  No entrepreneur should focus on the non-reoccurring event of COVID-19.  You have to go back to 1918 to see a similar event hit the United States economy.  The focus should be on what can be achieved in the next 12 months.

If you own a business and want to sell it with this value enhancing, strong opportunity on the horizon or want to purchase a business to take advantage of the opportunity we would welcome the opportunity to talk with you.  If we are not representing a business in your desired industry or geographic area for sale, we also represent a group of vetted, quality franchised business opportunities that can introduce almost any service into your community.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.